Northern Trust stock assigned with Hold on cautious stance

On Tuesday, Truist Securities began coverage on Northern Trust (NASDAQ:NTRS) shares, assigning a Hold rating to the company's stock along with a price target of $110.00.

According to InvestingPro analysis, the stock appears undervalued, trading at a P/E ratio of 12.9. The financial services firm, which operates as a trust and custody bank as well as a wealth manager, was recognized for its growth in assets under custody/administration (AUC/A) following the Global Financial Crisis (GFC).

Northern Trust, with a market capitalization of $20.46 billion, has been noted for its organic AUC/A growth, which outpaced that of competitors like BK and STT over a decade. The company has demonstrated strong momentum, with a 26% price return over the past six months. This growth allowed Northern Trust to justify a more rapidly expanding cost base, leading to a premium valuation.

However, the analyst pointed out that a slowdown in asset and revenue growth in recent years has been accompanied by persistently high costs, which are anticipated to only gradually decrease in the near term. The company, which is not a Global Systemically Important Bank (GSIB) like some of its peers, stands as the smallest of the trust banks with $156 billion in assets and approximately $14 trillion in AUC/A.

With annual revenue of $7.86 billion and a remarkable 54-year track record of consecutive dividend payments, as highlighted by InvestingPro, Northern Trust has maintained a strong market position. The analyst's commentary highlighted that Northern Trust's asset servicing business accounts for about two-thirds of its revenues, with wealth management comprising the remaining third.

The Hold rating reflects a cautious stance on the stock, suggesting that while the company holds a solid position in the market, there are concerns regarding its cost structure and revenue growth that may influence its performance moving forward.

The $110 price target set by Truist Securities serves as an indicator of the firm's valuation of Northern Trust's stock for potential investors. For deeper insights into Northern Trust's valuation and 8 additional exclusive ProTips, visit InvestingPro.

In other recent news, Northern Trust Corporation (NASDAQ:NTRS) has been in the limelight due to its strong third quarter results. The company reported a net income of $465 million and earnings per share of $2.22. Key contributing factors included a rise in Trust fees, particularly in Wealth Management, which saw a 9% increase, and assets under management reaching a record $444 billion, marking a 20% year-over-year increase.

RBC Capital Markets, Evercore ISI, and BofA Securities have all adjusted their outlook on Northern Trust, raising their price targets based on the robust earnings performance. RBC Capital Markets increased the price target to $107.00, reaffirming an Outperform rating. Evercore ISI raised the price target to $103, while BofA Securities increased its price target to $115.

The company continues to face challenges with persistent expense issues, but Northern Trust's management is actively working to reduce expense growth. These recent developments have led to a return of $453 million to shareholders through dividends and stock repurchases. BofA Securities and Evercore ISI have revised their EPS estimates for Northern Trust's fourth quarter 2024 and full-year 2025 to $1.92 and $7.58 respectively.

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